The exposure is small, the risks of contagion do not exist and the situation of European financial institutions is solid, so the fall of Silicon Valley Bank should not have chained consequences on this side of the Atlantic. However, and given the “greater volatility of the financial markets”, all organizations, and especially the Federal Reserve and the European Central Bank, should “act with the utmost prudence”. That is: think very carefully if raising interest rates again this week is the most appropriate thing to do and if, if so, they should be increases of half a point, as planned.
That is the message conveyed this Monday by the Eurozone Economy and Finance Ministers in Brussels, before the start of the Eurogroup meeting. “We do not see specific risks of contagion. Of course we are monitoring everything that happens in close contact with the ECB. We have taken note of the measures taken by the authorities to avoid contagion there and we stress the fact that European banks, all and not only the large ones, they have stable balance sheets following the Basel rules. We are monitoring the possibility of an impact, but there is no significant risk,” said the Commissioner for Economic Affairs, Paolo Gentiloni.
Although there are more solid rules, healthier balance sheets, firmer structures and capital requirements have improved, the markets are punishing the banks this Monday, and among them the Spanish ones. But the continental authorities believe that it is not, at least for the moment, something worrying. “The impact on the reduction was predictable but that is one thing and that there is a risk of real contagion is another. I don’t think we have,” the Italian politician insisted.
“The US authorities have acted quickly and forcefully. This situation of volatility in the financial markets comes with a Spanish banking system that has a strengthened framework of supervision and regulation and a healthy situation of its balance sheets, but obviously we closely follow the news and This issue will be addressed at the meeting of ministers. The greatest turbulence in the financial markets is derived from the fragile situation of some banks there, but the Spanish have a healthy situation with their balance sheets and also with prospects for growth and good evolution in 2023”, said the Spanish vice president, Nadia Calviño.
Asked specifically about the possibility that some of the national entities may be exposed to their business with Silicon Valley Bank, Calviño has been clear: “I am not aware of any specific exposure to the banks that are being affected in the US.” And the head of the Economy has also been very specific regarding whether this situation, which has generated major shocks in the Stock Markets and revived old ghosts, should have consequences for monetary policy.
Goldman Sachs estimates that the worst banking crisis since 2008 may cause the Federal Reserve not to carry out a new interest rate hike this week, as expected, after having to act against time to avoid contagion to the country’s financial system. And the Spanish minister is also in favor of the fact that, in view of this uncertainty and these movements in the markets, the European Central Bank should think twice about maintaining the half-point increase scheduled for this Thursday. “At this moment and in a context of such intense volatility, it is necessary that all agents, public and private, banks, financial institutions, and those responsible for fiscal and monetary policy, act with the utmost prudence. I think my message is quite clear,” he said. said the Spanish
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